Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / Proposed Rules 22633 

may result from errors or omissions in 

the services provided under the contract 

and compliance with all Federal, State, 

and local requirements effective on the 

contract execution date. 

(iv) An evaluation of the contractor’s 

performance on previous similar 

projects in which the contractor acted in 

a similar capacity. 

(v) A detailed listing and cost estimate 

of equipment and supplies not included 

in the construction contract but which 

are necessary to properly operate the 

facility. 

(vi) Evidence that a qualified 

construction inspector who is 

independent of the contractor has or 

will be hired. 

(vii) Preliminary plans and outline 

specifications. However, final plans and 

specifications must be completed and 

reviewed by Rural Development prior to 

the start of construction. 

(viii) The owner’s attorney’s opinion 

and comments regarding the legal 

adequacy of the proposed contract 

documents and evidence that the owner 

has the legal authority to enter into and 

fulfill the contract. 

(2) The State Office may approve 

design/build or construction 

management/constructor projects if the 

contract amount is equal to or less than 

$250,000. 

(3) If the contract amount exceeds 

$250,000, National Office prior 

concurrence must be obtained in 

accordance with § 1942.9(b) of this 

subpart. Only that information required 

under § 1942.9(b) of this subpart must 

be provided to National Office Program 

Support Staff for review. Additional 

information, such as plans and 

specifications, may be submitted by the 

State Office, if a review of those items 

is desired. 

(4) The design/build method of 

construction is one in which the 

architectural and engineering services, 

normally provided by an independent 

consultant to the owner, are combined 

with those of the General Contractor 

under a single source contract. These 

services are commonly provided by a 

design/build firm, a joint venture 

between an architectural firm and a 

construction firm, or a company 

providing pre-engineered buildings and 

design services. 

(5) The Construction Management/ 

constructor (CMc), acts in the capacity 

of a General Contractor and is actually 

responsible for the construction. This 

type of construction management is also 

referred to as Construction Manager ‘‘At 

Risk’’. The construction contract is 

between the owner and the CMc. The 

CMc, in turn, may subcontract for some 

or all of the work. 

(6) The National Office may approve 

other alternative contact methods, such 

as Construction Management/advisor 

(CMa), with a recommendation from the 

State Office. The recommendation shall 

indicate the circumstances which prove 

this method advantageous to the 

applicant and the government. A CMa 

acts in an advisory capacity to the 

owner, and the actual contract for 

construction is between the owner and 

a prime contractor or multiple prime 

contractors. When a contract for an 

architect and a CMa are being provided, 

care must be taken to assure that 

separate professionals are not being paid 

to provide similar services. Further, 

paragraph (e)(3) of this section 

discourages separate contracts for 

construction. 

(7) All alternate contracting method 

projects must comply with the 

requirements for ‘‘maximum open and 

free competition’’ in paragraph (j)(2) of 

this section. Choosing an alternate 

contracting method is not a way to 

avoid competition. Further information 

on procurement methods, which must 

be followed, is provided in paragraph 

(k) of this section. 

* * * * * 

Dated: April 1, 2011. 

Dallas Tonsager, 

Under Secretary, Rural Development. 

Dated: April 11, 2011. 

Michael Scuse, 

Acting Under Secretary, Farm and Foreign 

Agricultural Services. 

[FR Doc. 2011–9630 Filed 4–21–11; 8:45 am] 

BILLING CODE 3410–XV–P 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Part 48 

[Docket ID OCC–2011–0007] 

RIN 1557–AD42 

Retail Foreign Exchange Transactions 

AGENCY: Office of the Comptroller of the 

Currency, Department of the Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Office of the Comptroller 

of the Currency (OCC) is proposing a 

rule authorizing national banks, Federal 

branches or agencies of foreign banks, 

and their operating subsidiaries to 

engage in off-exchange transactions in 

foreign currency with retail customers. 

The proposed rule also describes 

various requirements with which 

national banks, Federal branches or 

agencies of foreign banks, and their 

operating subsidiaries must comply to 

conduct such transactions. 

DATES: Comments on this notice of 

proposed rulemaking must be received 

by May 23, 2011. 

ADDRESSES: Because paper mail in the 

Washington, DC, area is subject to delay, 

commenters are encouraged to submit 

comments by the Federal eRulemaking 

Portal or e-mail. Please use the title 

‘‘Retail Foreign Exchange Transactions’’ 

to facilitate the organization and 

distribution of the comments. You may 

submit comments by any of the 

following methods: 

• Federal eRulemaking Portal— 

‘‘regulations.gov’’: Go to http:// 

www.regulations.gov. Select ‘‘Document 

Type’’ of ‘‘Proposed Rules,’’ and in 

‘‘Enter Keyword or ID Box,’’ enter Docket 

ID ‘‘OCC–2011–0007,’’ and click 

‘‘Search.’’ On ‘‘View By Relevance’’ tab at 

bottom of screen, in the ‘‘Agency’’ 

column, locate the proposed rule for the 

OCC, in the ‘‘Action’’ column, click on 

‘‘Submit a Comment’’ or ‘‘Open Docket 

Folder’’ to submit or view public 

comments and to view supporting and 

related materials for this rulemaking 

action. 

Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for submitting or 

viewing public comments, viewing 

other supporting and related materials, 

and viewing the docket after the close 

of the comment period. 

• E-mail: 

regs.comments@occ.treas.gov. 

• Mail: Office of the Comptroller of 

the Currency, 250 E Street, SW., Mail 

Stop 2–3, Washington, DC 20219. 

• Fax: (202) 874–5274. 

• Hand Delivery/Courier: 250 E 

Street, SW., Mail Stop 2–3, Washington, 

DC 20219. 

Instructions: You must include ‘‘OCC’’ 

as the agency name and ‘‘Docket ID 

OCC–2011–0007’’ in your comment. In 

general, the OCC will enter all 

comments received into the docket and 

publish them on the Regulations.gov 

Web site without change, including any 

business or personal information that 

you provide such as name and address 

information, e-mail addresses, or phone 

numbers. Comments received, including 

attachments and other supporting 

materials, are part of the public record 

and subject to public disclosure. Do not 

enclose any information in your 

comment or supporting materials that 

you consider confidential or 

inappropriate for public disclosure. 

You may review comments and other 

related materials that pertain to this 


erowe on DSK5CLS3C1PROD with PROPOSALS-1
22634 Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / Proposed Rules 

1Public Law 111–203, 124 Stat. 1376. 

2 Dodd-Frank Act § 742(c)(2) (to be codified at 7 

U.S.C. 2(c)(2)(E)). In this preamble, citations to the 

retail forex statutory provisions will be the section 

where the provisions will be codified in the CEA. 3The CEA defines ‘‘financial institution’’ as 

including ‘‘a depository institution (as defined in 

section 3 of the Federal Deposit Insurance Act (12 

U.S.C. 1813)).’’ 7 U.S.C. 1a(21)(E). National banks 

are depository institutions. See 12 U.S.C. 1813(a)(1) 

and (c)(1). 

4For purposes of the retail forex rules, ‘‘Federal 

regulatory agency’’ includes ‘‘an appropriate Federal 

banking agency.’’ 7 U.S.C. 2(c)(2)(E)(i)(III). The OCC 

is the appropriate Federal banking agency for 

national banks and Federal branches and agencies 

of foreign banks. 12 U.S.C. 1813(q)(1); Dodd-Frank 

Act § 721(a)(2) (amending 7 U.S.C. 1a to define 

‘‘appropriate Federal banking agency’’ by reference 

to 12 U.S.C. 1813). 

5A retail customer is a person who is not an 

‘‘eligible contract participant’’ under the CEA. 

6 7 U.S.C. 2(c)(2)(E)(ii)(I). 

7 7 U.S.C. 2(c)(2)B(i)(II). 

8 7 U.S.C. 2(c)(2)(E)(iii)(II). 

9 7 U.S.C. 2(c)(2)(E)(iii)(I). 

10See Dodd-Frank Act § 754. 

11 Dodd-Frank Act § 312. 

12Regulation of Off-Exchange Retail Foreign 

Exchange Transactions and Intermediaries, 75 FR 

55409 (Sept. 10, 2010) (Final CFTC Retail Forex 

Rule). The CFTC proposed these rules prior to the 

enactment of the Dodd-Frank Act. Regulation of 

Off-Exchange Retail Foreign Exchange Transactions 

and Intermediaries, 75 FR 3281 (Jan. 20, 2010) 

(Proposed CFTC Retail Forex Rule). 

13See OCC Bulletin 94–13 (Feb. 24, 1994); see 

also OCC Bulletin 1995–52 (Sept. 22, 1995). 

proposed rule by any of the following 

methods: 

• Viewing Comments Electronically: 

Go to http://www.regulations.gov. Select 

‘‘Document Type’’ of ‘‘Proposed Rules,’’ 

and in ‘‘Enter Keyword or ID Box,’’ enter 

Docket ID ‘‘OCC–2011–0007,’’ and click 

‘‘Search.’’ Comments will be listed under 

‘‘View By Relevance’’ tab at bottom of 

screen. If comments from more than one 

agency are listed, the ‘‘Agency’’ column 

will indicate which comments were 

received by the OCC. 

• Viewing Comments Personally: You 

may personally inspect and photocopy 

comments at the OCC, 250 E Street, 

SW., Washington, DC. For security 

reasons, the OCC requires that visitors 

make an appointment to inspect 

comments. You may do so by calling 

(202) 874–4700. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and to submit to security screening in 

order to inspect and photocopy 

comments. 

• Docket: You may also view or 

request available background 

documents and project summaries using 

the methods described above. 

FOR FURTHER INFORMATION CONTACT: 

Tena Alexander, Senior Counsel, or 

Roman Goldstein, Attorney, Securities 

and Corporate Practices Division, (202) 

874–5120. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed into law the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act of 2010 (Dodd-Frank Act).1 As 

amended by the Dodd-Frank Act,2 the 

Commodity Exchange Act (CEA) 

provides that a United States financial 

institution 3 for which there is a Federal 

regulatory agency 4 shall not enter into, 

or offer to enter into, a transaction 

described in section 2(c)(2)(B)(i)(I) of the 

CEA with a retail customer 5 except 

pursuant to a rule or regulation of a 

Federal regulatory agency allowing the 

transaction under such terms and 

conditions as the Federal regulatory 

agency shall prescribe 6 (a ‘‘retail forex 

rule’’). Section 2(c)(2)(B)(i)(I) includes 

‘‘an agreement, contract, or transaction 

in foreign currency that * * * is a 

contract of sale of a commodity for 

future delivery (or an option on such a 

contract) or an option (other than an 

option executed or traded on a national 

securities exchange registered pursuant 

to section 6(a) of the Securities 

Exchange Act of 1934 (15 U.S.C. 

78f(a)).’’ 7 A Federal regulatory agency’s 

retail forex rule must treat all such 

futures and options and all agreements, 

contracts, or transactions that are 

functionally or economically similar to 

such futures and options similarly.8

Retail forex rules must prescribe 

appropriate requirements with respect 

to disclosure, recordkeeping, capital and 

margin, reporting, business conduct, 

and documentation requirements, and 

may include such other standards or 

requirements as the Federal regulatory 

agency determines to be necessary.9

This Dodd-Frank Act amendment to the 

CEA takes effect 360 days from the 

enactment of the Act.10 Therefore, as of 

July 16, 2011, national banks, Federal 

branches and agencies of foreign banks, 

and operating subsidiaries of the 

foregoing (collectively, national banks) 

may not engage in a retail forex 

transaction except pursuant to retail 

forex rules issued by the OCC. 

In addition, on July 21, 2011, the OCC 

will become the appropriate Federal 

banking agency for Federal savings 

associations.11 The OCC plans to 

regulate retail forex transactions 

conducted by Federal savings 

associations under the same terms as in 

this proposed rule. However, the OCC 

cannot issue regulations governing 

Federal savings associations until July 

21, 2011. Therefore, the OCC anticipates 

issuing on that date an interim final rule 

with request for public comment that 

would expand the scope of this 

regulation to also cover Federal savings 

associations. 

On September 10, 2010, the 

Commodity Futures Trading 

Commission (CFTC) adopted a retail 

forex rule for persons subject to its 

jurisdiction.12 After studying and 

considering the CFTC’s retail forex rule, 

and being mindful of the desirability of 

issuing comparable rules, the OCC is 

proposing to adopt a substantially 

similar rule for national banks wishing 

to engage in retail forex transactions. 

The Dodd-Frank Act does not require 

that retail forex rules be issued jointly, 

or on a coordinated basis, with any 

other Federal regulatory agency. The 

Federal banking agencies (the OCC, 

Federal Reserve Board, and Federal 

Deposit Insurance Corporation) are 

issuing separate proposed rules. 

However, the Federal banking agencies 

intend to coordinate their efforts. 

For national banks, the requirements 

in this proposed rule could overlap with 

applicable expectations contained in the 

Interagency Statement on Retail Sales of 

Nondeposit Investment Products (NDIP 

Policy Statement).13 The NDIP Policy 

Statement sets out guidance regarding 

the OCC’s expectations when a national 

bank engages in the sale of nondeposit 

investment products to retail customers. 

The NDIP Policy Statement addresses 

issues such as disclosure, suitability, 

sales practices, compensation, and 

compliance. The OCC preliminarily 

views retail forex transactions as 

nondeposit investment products, but the 

terms ‘‘retail forex customer’’ in this 

proposed rule and ‘‘retail customer’’ in 

the NDIP Policy Statement are not 

necessarily co-extensive. After the 

effective date of the final version of this 

proposed rule, the OCC will expect 

national banks engaging in or offering 

retail forex transactions to also comply 

with the expectations set out in the 

NDIP Policy Statement to the extent 

such expectations do not conflict with 

the requirements of the OCC’s final 

retail forex rule. 

Question I.1: Does the proposed 

regulation create issues concerning 

application of the NDIP Policy 

Statement to retail forex transactions 

that the OCC should address? 

II. Section-by-Section Description of the 

Rule 

Structure and Approach 

The OCC’s proposed retail forex rule 

is modeled on the CFTC’s retail forex 

rule to promote consistent treatment of 

retail forex transaction regardless of 

whether a retail forex customer’s dealer 

is a national bank or a CFTC registrant. 

The proposal includes various changes 


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Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / Proposed Rules 22635 

14See, e.g., 12 CFR parts 3, 6, and 28. 

15The definition of ‘‘eligible contract participant’’ 

is found in the CEA and is discussed below. 

16 7 U.S.C. 2(c)(2)(B)(i)(I). 

17 7 U.S.C. 2(c)(2)(B)(i)(I). 

18 7 U.S.C. 2(c)(2)(C). 

19See generally CFTC v. Int’l Fin. Servs. (New 

York), Inc., 323 F. Supp. 2d 482, 495 (S.D.N.Y. 

2004) (distinguishing between foreign exchange 

futures contracts and spot contracts in foreign 

exchange, and noting that foreign currency trades 

settled within two days are ordinarily spot 

transactions rather than futures contracts); see also 

Bank Brussels Lambert v. Intermetals Corp., 779 F. 

Supp. 741, 748 (S.D.N.Y. 1991). 

20See generally CFTC v. Int’l Fin. Servs. (New 

York), Inc., 323 F. Supp. 2d 482, 495 (S.D.N.Y. 

2004) (distinguishing between forward contracts in 

foreign exchange and foreign exchange futures 

contracts); see also William L. Stein, The ExchangeTrading Requirement of the Commodity Exchange 

Act, 41 Vand. L.Rev. 473, 491 (1988). In contrast to 

forward contracts, futures contracts generally 

include several or all of the following 

characteristics: (i) Standardized nonnegotiable 

terms (other than price and quantity); (ii) parties are 

required to deposit initial margin to secure their 

obligations under the contract; (iii) parties are 

obligated and entitled to pay or receive variation 

margin in the amount of gain or loss on the position 

periodically over the period the contract is 

outstanding; (iv) purchasers and sellers are 

permitted to close out their positions by selling or 

purchasing offsetting contracts; and (v) settlement 

may be provided for by either (a) cash payment 

through a clearing entity that acts as the 

counterparty to both sides of the contract without 

delivery of the underlying commodity; or (b) 

physical delivery of the underlying commodity. See 

Edward F. Greene et al., U.S. Regulation of 

International Securities and Derivatives Markets 

§ 14.08[2] (8th ed. 2006). 

21CFTC v. Zelener, 373 F.3d 861 (7th Cir. 2004); 

see also CFTC v. Erskine, 512 F.3d 309 (6th Cir. 

2008). 

22 7 U.S.C. 2(c)(2)(E)(iii) (requiring that retail 

forex rules treat all functionally or economically 

similar transactions similarly); see 17 CFR 5.1(m) 

(defining ‘‘retail forex transaction’’ for CFTCregistered retail forex dealers). 23For example, in Zelener, the retail forex dealer 

retained the right, at the date of delivery of the 

currency to deliver the currency, roll the 

transaction over, or offset all or a portion of the 

transaction with another open position held by the 

customer. See CFTC v. Zelener, 373 F.3d 861, 868 

(7th Cir. 2004). 

24See, e.g., CFTC v. Erskine, 512 F.3d 309, 326 

(6th Cir. 2008); CFTC v. Zelener, 373 F.3d 861, 869 

(7th Cir. 2004). 25The term ‘‘eligible contract participant’’ is 

defined at 7 U.S.C. 1a(18), and for purposes most 

relevant to this proposed rule generally includes: 

(a) A corporation, partnership, proprietorship, 

organization, trust, or other entity— 

(1) That has total assets exceeding $10,000,000; 

(2) The obligations of which under an agreement, 

contract, or transaction are guaranteed or otherwise 

supported by a letter of credit or keepwell, support, 

or other agreement by certain other eligible contract 

participants; or 

(3) That— 

(i) Has a net worth exceeding $1,000,000; and 

(ii) Enters into an agreement, contract, or 

transaction in connection with the conduct of the 

entity’s business or to manage the risk associated 

with an asset or liability owned or incurred or 

reasonably likely to be owned or incurred by the 

entity in the conduct of the entity’s business; 

(b) Subject to certain exclusions, 

(1) A governmental entity (including the United 

States, a State, or a foreign government) or political 

subdivision of a governmental entity; 

Continued 

that reflect differences between OCC 

and CFTC supervisory regimes and 

differences between national banks and 

CFTC registrants. For example: 

• The OCC’s proposed retail forex 

rule leverages the OCC’s existing 

comprehensive supervision of national 

banks. For example, the OCC’s proposed 

retail forex rule does not include 

registration requirements, because 

national banks are already subject to 

comprehensive supervision by the OCC. 

Thus, instead of a registration 

requirement, national banks must 

receive a supervisory non-objection to 

conduct a retail forex business. 

• Because national banks are already 

subject to various capital and other 

supervisory requirements,14 the OCC’s 

proposed retail forex rule generally 

requires national banks wishing to 

engage in retail forex transactions to be 

‘‘well capitalized.’’ 

Section 48.1—Authority, Purpose, and 

Scope 

This section authorizes a national 

bank to conduct retail forex 

transactions. 

The OCC notes that some national 

banks may also engage in retail forex 

transactions through their foreign 

branches. The CEA does not clearly 

define whether foreign branches of 

national banks may be considered 

United States financial institutions that 

can be included in the scope of this 

proposed rule. Generally, the OCC 

defines a national bank to include all its 

branches, foreign and domestic. Using 

that definition, the proposed retail forex 

rule would include these branches, and 

all their transactions would be subject to 

the terms of this proposed rule. 

Question II.1.1: The OCC requests 

comment on whether this rule should 

apply to national banks’ foreign 

branches conducting retail forex 

transactions abroad, whether with U.S. 

or foreign customers. 

Section 48.2—Definitions 

This section defines terms specific to 

retail forex transactions and to the 

regulatory requirements that apply to 

retail forex transactions. 

The definition of ‘‘retail forex 

transaction’’ generally includes the 

following transactions in foreign 

currency between a national bank and a 

person that is not an eligible contract 

participant: 15 (i) A future or option on 

such a future; 16 (ii) options not traded 

on a registered national securities 

exchange; 17 and (iii) certain leveraged 

or margined transactions.18 This 

definition has several important 

features. 

First, certain transactions in foreign 

currency are not ‘‘retail forex 

transactions.’’ For example, a ‘‘spot’’ 

forex transaction where one currency is 

bought for another and the two 

currencies are exchanged within two 

days would not meet the definition of a 

‘‘retail forex transaction,’’ since actual 

delivery occurs as soon as practicable.19

Similarly, a ‘‘retail forex transaction’’ 

does not include a forward contract 

with a commercial entity that creates an 

enforceable obligation to make or take 

delivery, provided the commercial 

counterparty has the ability to make 

delivery and accept delivery in 

connection with its line of business.20 In 

addition, the definition does not include 

transactions done through an exchange, 

because in those cases the exchange 

would be the counterparty to both the 

national bank and the retail forex 

customer, rather than the national bank 

directly facing the retail forex customer. 

Second, rolling spot forex transactions 

(so-called Zelener 21 contracts), 

including without limitation such 

transactions traded on the Internet, 

through a mobile phone, or on an 

electronic platform, could fall within 

the definition’s third category; the OCC 

preliminarily believes that rolling spot 

transactions should be regulated as 

retail forex transactions.22 A rolling spot 

forex transaction nominally requires 

delivery of currency within two days, 

like spot transactions. However, in 

practice, the contracts are indefinitely 

renewed every other day and no 

currency is actually delivered until one 

party affirmatively closes out the 

position.23 Therefore, the contracts are 

economically more like futures than 

spot contracts, although courts have 

held them to be spot contracts in form.24

Question II.2.1: Should leveraged or 

margined forex transactions, including 

rolling spot forex transactions and 

functionally or economically similar 

transactions, be included in the 

definition of ‘‘retail forex transaction’’? 

Would excluding such transactions 

create a regulatory gap for retail forex 

products? 

This section defines several terms by 

reference to the CEA, the most 

important of which is ‘‘eligible contract 

participant.’’ Foreign currency 

transactions with eligible contract 

participants are not considered retail 

forex transactions and are therefore not 

subject to this rule. In addition to a 

variety of financial entities, certain 

governmental entities, businesses, and 

individuals may be eligible contract 

participants.25


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22636 Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / Proposed Rules 

(2) A multinational or supranational 

governmental entity; or 

(3) An instrumentality, agency or department of 

an entity described in (b)(1) or (2); and 

(c) An individual who has amounts invested on 

a discretionary basis, the aggregate of which is in 

excess of— 

(1) $10,000,000; or 

(2) $5,000,000 and who enters into the agreement, 

contract, or transaction in order to manage the risk 

associated with an asset owned or liability incurred, 

or reasonably likely to be owned or incurred, by the 

individual. 

26 7 U.S.C. 2(c)(2)(E)(ii)(I). 

27Proposed CFTC Retail Forex Rule, 75 FR at 

3287 n.54. 

28 17 CFR 5.5(e)(1). 

29Proposed CFTC Retail Forex Rule, 75 FR at 

3289. 

30Final CFTC Retail Forex Rule, 75 FR at 55412. 

31 17 CFR 5.5(b). 

Question II.2.2: Does the Commodity 

Exchange Act’s definition of ‘‘eligible 

contract participant’’ appropriately 

capture who is not a retail customer for 

purposes of this proposed rule? Should 

the OCC expand the definition of retail 

forex customer to include persons who 

are eligible contract participants? If so, 

which eligible contract participants 

should be considered retail forex 

customers? 

Section 48.3—Prohibited Transactions 

This section prohibits a national bank 

and its institution-affiliated parties from 

engaging in fraudulent conduct in 

connection with retail forex 

transactions. This section also prohibits 

a national bank from acting as a 

counterparty to a retail forex transaction 

if the national bank or its affiliate 

exercises discretion over the customer’s 

retail forex account because the OCC 

views such self-dealing as 

inappropriate. 

Section 48.4—Supervisory NonObjection 

This section requires a national bank 

to obtain a written supervisory nonobjection prior to engaging in a retail 

forex business. To obtain such nonobjection, the national bank will have to 

provide such information as the OCC 

deems necessary to determine that the 

national bank would satisfy the 

requirements of the rule. This 

information will include information 

on: customer due diligence (including 

credit evaluations, customer 

appropriateness, and ‘‘know your 

customer’’ documentation); new product 

approvals; haircuts for noncash margin; 

and conflicts of interest. In addition, the 

national bank must establish that it has 

adequate written policies, procedures, 

and risk measurement and management 

systems and controls. 

National banks engaged in retail forex 

transactions as of the effective date of 

this rule who promptly request the 

OCC’s review of their retail forex 

business will have six months, or a 

longer period provided by the OCC, to 

bring their operations into conformance 

with the rule. Under this rule, a national 

bank that requests the OCC’s review 

within 30 days of the effective date of 

the final retail forex rule and submits 

the information requested by the OCC 

will be deemed to be operating its retail 

forex business pursuant to a rule or 

regulation of a Federal regulatory 

agency, as required under the 

Commodity Exchange Act, for such 

period.26

A national bank need not join a 

futures self-regulatory organization as a 

condition of conducting a retail forex 

business. 

Section 48.5—Application and Closing 

Out of Offsetting Long and Short 

Positions 

This section requires a national bank 

to close out offsetting long and short 

positions in a retail forex account. The 

national bank would have to offset such 

positions regardless of whether the 

customer has instructed otherwise. The 

CFTC concluded that ‘‘keeping open 

long and short positions in a retail forex 

customer’s account removes the 

opportunity for the customer to profit 

on the transactions, increases the fees 

paid by the customer and invites 

abuse.’’ 27 The OCC agrees with this 

concern. A national bank may offset 

retail forex transactions as instructed by 

the retail forex customer or the 

customer’s agent if the instructions do 

not come from the national bank. 

Section 48.6—Disclosure 

This section requires a national bank 

to provide retail forex customers with a 

risk disclosure statement similar to the 

one required by the CFTC’s retail forex 

rule, but tailored to address certain 

unique characteristics of retail forex in 

national banks. The prescribed risk 

disclosure statement would describe the 

risks associated with retail forex 

transactions. The disclosure statement 

would make clear that a national bank 

is prohibited from applying customer 

losses arising out of retail forex 

transactions against any property of a 

customer other than money or property 

specifically given as margin for retail 

forex transactions; the national bank 

may not use rights of set-off to collect 

margin for or cover losses arising out of 

retail forex transactions. 

In its retail forex rule, the CFTC 

requires its registrants to disclose to 

retail customers the percentage of retail 

forex accounts that earned a profit, and 

the percentage of such accounts that 

experienced a loss, during each of the 

most recent four calendar quarters.28

The CFTC initially explained that ‘‘the 

vast majority of retail customers who 

enter these transactions do so solely for 

speculative purposes, and that relatively 

few of these participants trade 

profitably.’’ 29 In its final rule, the CFTC 

found this requirement appropriate to 

protect retail customers from ‘‘inherent 

conflicts embedded in the operations of 

the retail over-the-counter forex 

industry.’’ 30 The OCC generally agrees 

with the CFTC and this proposed rule 

requires this disclosure; however, the 

OCC invites comments regarding this 

approach. 

Question II.6.1: Does this disclosure 

provide meaningful information to retail 

customers of national banks? Would 

alternative disclosures more effectively 

accomplish the objectives of the 

disclosure? 

Similarly, the CFTC’s retail forex rule 

requires a disclosure that when a retail 

customer loses money trading, the 

dealer makes money on such trades, in 

addition to any fees, commissions, or 

spreads.31 The proposed rule includes 

this disclosure requirement. 

Question II.6.2: Does this disclosure 

provide meaningful information to retail 

customers of national banks? Would 

alternative disclosures more effectively 

accomplish the objectives of the 

disclosure? 

As proposed, the risk disclosure must 

be provided as a separate document. 

Question II.6.3: Would it be 

convenient to national banks and retail 

forex customers to allow the retail forex 

risk disclosure to be combined with 

other disclosures that national banks 

make to their customers? Or would 

combining disclosures diminish the 

impact of the retail forex disclosure? 

Question II.6.4: Should the rule 

require disclosure of the fees the 

national bank charges retail forex 

customers for retail forex transactions? 

What fees do national banks currently 

charge retail forex customers for retail 

forex transactions? Are there other costs 

to retail forex customers of engaging in 

retail forex transactions that national 

banks should disclose? If so, what are 

these costs? 

Section 48.7—Recordkeeping 

This section specifies which 

documents and records a national bank 

engaged in retail forex transactions must 

retain for examination by the OCC. This 

section also prescribes document 

maintenance standards. 


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32 12 CFR part 6. 

33 12 CFR part 3. 

34See National Futures Association, Forex 

Transaction: A Regulatory Guide 17 (Feb. 2011); 

New York Federal Reserve Bank, Survey of North 

American Foreign Exchange Volume tbl. 3e (Jan. 

2011); Bank for International Settlements, Report on 

Global Foreign Exchange Market Activity in 2010 at 

15 tbl. B.6 (Dec. 2010). 

35The Final CFTC Retail Forex Rule similarly 

does not define ‘‘major currency.’’ 

Section 48.8—Capital Requirements 

This section requires that a national 

bank that offers or enters into retail 

forex transactions must be ‘‘well 

capitalized’’ as defined in the OCC’s 

prompt corrective action regulation 32 or 

the national bank must obtain an 

exemption from the OCC. In addition, a 

national bank must continue to hold 

capital against retail forex transactions 

as provided in the OCC’s capital 

regulation.33 This rule does not amend 

the OCC’s prompt corrective action 

regulation or capital regulation. 

Section 48.9—Margin Requirements 

Paragraph (a) requires a national bank 

that engages in retail forex transactions, 

in advance of any such transaction, to 

collect from the retail forex customer 

margin equal to at least two percent of 

the notional value of the retail forex 

transaction if the transaction is in a 

major currency pair, and at least five 

percent of the notional value of the 

retail forex transaction otherwise. These 

margin requirements are identical to the 

requirements imposed by the CFTC’s 

retail forex rule. A major currency pair 

is a currency pair with two major 

currencies. The major currencies 

currently are the U.S. Dollar (USD), 

Canadian Dollar (CAD), Euro (EUR), 

United Kingdom Pound (GBP), Japanese 

Yen (JPY), Swiss franc (CHF), New 

Zealand Dollar (NZD), Australian Dollar 

(AUD), Swedish Kronor (SEK), Danish 

Kroner (DKK), and Norwegian Krone 

(NOK).34 An evolving market could 

change the major currencies, so the OCC 

is not proposing to define the term 

‘‘major currency,’’ but rather expects that 

national banks will obtain an 

interpretive letter from the OCC prior to 

treating any currency other than those 

listed above as a ‘‘major currency.’’ 35

Question II.9.1: The OCC requests 

comment on whether it should 

explicitly define the major currencies or 

major currency pairs in the proposed 

rule and whether commenters have any 

other suggestions on how the OCC 

should identify a major currency or 

major currency pair. 

For retail forex transactions, margin 

protects the retail forex customer from 

the risks related to trading with 

excessive leverage. The volatility of the 

foreign currency markets exposes retail 

forex customers to substantial risk of 

loss. High leverage ratios can 

significantly increase a customer’s 

losses and gains. Even a small move 

against a customer’s position can result 

in a substantial loss. Even with required 

margin, losses can exceed the margin 

posted, and if the account is not closed 

out, and depending on the specific 

circumstances, the customer could be 

liable for additional losses. Given the 

risks that inhere in the trading of retail 

forex transactions by retail customers, 

the only funds that should be invested 

in such transactions are those that the 

customer can afford to lose. 

Prior to the CFTC’s rule, non-bank 

dealers routinely permitted customers to 

trade with 1 percent margin (leverage of 

100:1) and sometimes with as little as 

0.25 percent margin (leverage of 400:1). 

When the CFTC proposed its retail forex 

rule in January 2010, it proposed a 

margin requirement of 10 percent 

(leverage of 10:1). In response to 

comments, the CFTC reduced the 

required margin in the final rule to 2 

percent (leverage of 50:1) for trades 

involving major currencies and 5 

percent (leverage of 20:1) for trades 

involving non-major currencies. 

Question II.9.2: The OCC believes that 

these margin requirements are 

appropriate to protect retail customers, 

but invites comments on whether the 

requirements should be adjusted. 

Paragraph (b) specifies the acceptable 

forms of margin that customers may 

post. National banks must establish 

policies and procedures providing for 

haircuts for noncash margin collected 

from customers and must review these 

haircuts annually. It may be prudent for 

national banks to review and modify the 

size of the haircuts more frequently. 

Question II.9.3: Should the OCC 

provide for haircuts for noncash margin 

posted for retail forex transactions? If so, 

what should those haircuts be? 

Paragraph (c) requires a national bank 

to hold each retail forex customer’s 

retail forex transaction margin in a 

separate account that contains only that 

customer’s retail forex margin. This 

paragraph is designed to work with the 

prohibition on set-off in paragraph (e), 

so that a national bank may not have an 

account agreement that treats all of a 

retail forex customer’s assets held by a 

bank as margin for retail forex 

transactions. 

Paragraph (d) requires a national bank 

to collect additional margin from the 

customer or to liquidate the customer’s 

position if the amount of margin held by 

the national bank fails to meet the 

requirements of paragraph (a). The 

proposed rule requires the national bank 

to mark the customer’s open retail forex 

positions and the value of the 

customer’s margin to the market daily to 

ensure that a retail forex customer does 

not accumulate substantial losses not 

covered by margin. 

Question II.9.4: How frequently do 

national banks currently mark retail 

forex customers’ open retail forex 

positions and the value of the 

customers’ margin to the market? 

Should the rule require marking 

customer positions and margin to the 

market daily, or would more frequent 

marks be more appropriate in light of 

the speed at which currency markets 

move? What is the most frequent mark 

to market requirement that is practical 

in light of the characteristics of the forex 

markets and the assets that retail forex 

customers may pledge as margin for 

retail forex transaction? 

Paragraph (e) prohibits a national 

bank from applying a retail forex 

customer’s losses against any asset or 

liability of the retail forex customer 

other than money or property given as 

margin. A national bank’s relationship 

with a retail forex customer may evolve 

out of a prior relationship of providing 

financial services or may evolve into 

such a relationship. Thus it is more 

likely that a national bank acting as a 

retail forex counterparty will hold other 

assets or liabilities of a retail forex 

customer, for example a deposit account 

or mortgage, than a retail forex dealer 

regulated by the CFTC. The OCC 

believes it is inappropriate to allow a 

national bank to leave trades open and 

allow additional losses to accrue that 

can be applied against a retail forex 

customer’s other assets or liabilities 

held by the national bank. 

Section 48.10—Required Reporting to 

Customers 

This section requires a national bank 

engaging in retail forex transactions to 

provide each retail forex customer a 

monthly statement and confirmation 

statements. 

Question II.10.1: The OCC requests 

comment on whether this section 

provides for statements that would be 

meaningful and useful to retail 

customers, or whether, in light of the 

distinctive characteristics of retail forex 

transactions, other information would 

be more appropriate. 

Section 48.11—Unlawful 

Representations 

This section prohibits a national bank 

and its institutional-affiliated parties 

from representing that the Federal 

government, the OCC, or any other 

Federal agency has sponsored, 

recommended, or approved retail forex 


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transactions or products in any way. 

This section also prohibits a national 

bank from implying or representing that 

it will guarantee against or limit retail 

forex customer losses or not collect 

margin as required by section 48.9. This 

section does not prohibit a national 

bank from sharing in a loss resulting 

from error or mishandling of an order, 

and guaranties entered into prior to 

effectiveness of the prohibition would 

only be affected if an attempt is made 

to extend, modify, or renew them. This 

section also does not prohibit a national 

bank from hedging or otherwise 

mitigating its own exposure to retail 

forex transactions or any other foreign 

exchange risk. 

Section 48.12—Authorization to Trade 

This section requires a national bank 

to have specific written authorization 

from a retail forex customer before 

effecting a retail forex transaction for 

that customer. 

Section 48.13—Trading and 

Operational Standards 

This section largely follows the 

trading standards of the CFTC’s retail 

forex rule, which were developed to 

prevent some of the deceptive or unfair 

practices identified by the CFTC and the 

National Futures Association. 

Under paragraph (a), a national bank 

engaging in retail forex transactions is 

required to establish and enforce 

internal rules, procedures and controls 

(1) to prevent front running, in which 

transactions in accounts of the national 

bank or its related persons are executed 

before a similar customer order; (2) to 

establish settlement prices fairly and 

objectively; and (3) to record and 

maintain transaction records and make 

them available to customers. 

Paragraph (b) prohibits a national 

bank engaging in retail forex 

transactions from disclosing that it 

holds another person’s order unless 

disclosure is necessary for execution or 

is made at the OCC’s request. 

Paragraph (c) ensures that institutionaffiliated parties of another retail forex 

counterparty do not open accounts with 

a national bank without the knowledge 

and authorization of the account 

surveillance personnel of the other retail 

forex counterparty to which they are 

affiliated. Similarly, paragraph (d) 

ensures that institution-affiliated parties 

of a national bank do not open accounts 

with other retail forex counterparties 

without the knowledge and 

authorization of the account 

surveillance personnel of the national 

bank to which they are affiliated. 

Paragraph (e) prohibits a national 

bank engaging in retail forex 

transactions from (1) entering a retail 

forex transaction to be executed at a 

price that is not at or near prices at 

which other retail forex customers have 

executed materially similar transactions 

with the national bank during the same 

time period, (2) changing prices after 

confirmation, (3) providing a retail forex 

customer with a new bid price that is 

higher (or lower) than previously 

provided without providing a new ask 

price that is similarly higher (or lower) 

as well, and (4) establishing a new 

position for a retail forex customer 

(except to offset an existing position) if 

the national bank holds one or more 

outstanding orders of other retail forex 

customers for the same currency pair at 

a comparable price. 

Paragraph (e)(3) does not prevent a 

national bank from changing the bid or 

ask prices of a retail forex transaction to 

respond to market events. The OCC 

understands that market practice among 

CFTC-registrants is not to offer requotes, 

but to simply reject orders and advise 

customers they may submit a new order 

(which the dealer may or may not 

accept). Similarly, a national bank may 

reject an order and advise customers 

they may submit a new order. 

Question II.13.1: Does this 

requirement appropriately protect retail 

forex customers? If not, how it should 

be modified? Would it be simpler for the 

rule to simply prohibit requoting, 

because national banks may instead 

reject an order and accept new orders 

from their retail forex customers? 

Paragraph (e)(4) requires a national 

bank engaging in retail forex 

transactions to execute similar orders in 

the order they are received. The 

prohibition prevents a national bank 

from offering preferred execution to 

some of its retail forex customers but 

not others. 

Section 48.14—Supervision 

This section imposes on a national 

bank and its agents, officers, and 

employees a duty to supervise 

subordinates with responsibility for 

retail forex transactions to ensure 

compliance with the OCC’s retail forex 

rule. 

Question II.14.1: Does this section 

impose any additional requirements not 

already encompassed by safety and 

soundness standards applicable to 

national banks and their agents, officers, 

and employees? 

Section 48.15—Notice of Transfers 

This section describes the 

requirements for transferring a retail 

forex account. Generally, a national 

bank must provide retail forex 

customers 30 days’ prior notice before 

transferring or assigning their account. 

Affected customers may then instruct 

the national bank to transfer the account 

to an institution of their choosing or 

liquidate the account. There are three 

exceptions to the above notice 

requirement: a transfer in connection 

with the receivership or conservatorship 

under the Federal Deposit Insurance 

Act; a transfer pursuant to a retail forex 

customer’s specific request; and a 

transfer otherwise allowed by applicable 

law. A national bank that is the 

transferee of retail forex accounts must 

generally provide the transferred 

customers with the risk disclosure 

statement of section 6 and obtain each 

affected customer’s written 

acknowledgement within 60 days. 

Section 48.16—Customer Dispute 

Resolution 

This section imposes limitations on 

how a national bank may handle 

disputes arising out of a retail forex 

transaction. For example, this section 

would restrict a national bank’s ability 

to require mandatory arbitration for 

such disputes. 

III. Request for Comments 

The OCC requests comment on all 

aspects of the proposed rule, including 

the questions posed in the preamble. In 

addition, the OCC requests comments 

on the following questions: 

• Question III.1: Does the proposed 

rule appropriately protect retail forex 

customers of national banks? 

• Question III.2: Are the proposed 

rule’s variations from the CFTC retail 

forex rule appropriately tailored to the 

differences between national banks and 

CFTC registrants and the regulatory 

regimes applicable to each? 

To assist in the review of comments, the 

OCC requests that commenters identify 

their comments by question number. 

IV. Regulatory Analysis 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601 et seq. (RFA) generally 

requires an agency that is issuing a 

proposed rule to prepare and make 

available for public comment an initial 

regulatory flexibility analysis that 

describes the impact of the proposed 

rule on small entities. The RFA provides 

that an agency is not required to prepare 

and publish an initial regulatory 

flexibility analysis if the agency certifies 

that the proposed rule will not, if 

promulgated as a final rule, have a 

significant economic impact on a 

substantial number of small entities. 

Under regulations issued by the Small 

Business Administration, a small entity 


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36Small Business Administration regulations 

define ‘‘small entities’’ to include banks with a fourquarter average of total assets of $175 million or less 

(13 CFR 121.201). 

includes a commercial bank with assets 

of $175 million or less.36 The proposed 

rule would impose recordkeeping and 

disclosure requirements on banks, 

including small banks, which engage in 

retail forex transactions with their 

customers. 

Pursuant to section 605(b) of the RFA, 

the OCC certifies that this proposed rule 

will not have a significant economic 

impact on a substantial number of the 

small entities it supervises. 

Accordingly, a regulatory flexibility 

analysis is not required. In making this 

determination, the OCC estimated that 

there are no small banking organizations 

currently engaging in retail forex 

transactions with their customers. 

Therefore, the OCC estimates that no 

small banking organizations under its 

supervision would be affected by the 

proposed rule. 

Persons wishing to submit written 

comments regarding the OCC’s 

certification under the RFA should refer 

to the instructions for submitting 

comments in the front of this release. 

Such comments will be considered and 

placed in the same public file as 

comments on the proposal itself. 

B. Paperwork Reduction Act 

Request for Comment on Proposed 

Information Collection 

In accordance with section 3512 of 

the Paperwork Reduction Act (PRA) of 

1995 (44 U.S.C. 3501–3521), the OCC 

may not conduct or sponsor, and a 

respondent is not required to respond 

to, an information collection unless it 

displays a currently valid Office of 

Management and Budget (OMB) control 

number. The information collection 

requirements contained in this notice of 

proposed rulemaking have been 

submitted by the OCC to OMB for 

review and approval under section 3506 

of the PRA and § 1320.11 of OMB’s 

implementing regulations (5 CFR part 

1320 et seq.). The information collection 

requirements are found in §§ 48.4–48.7, 

48.9–48.10, 48.13, 48.15–48.16. 

Comments are invited on: 

(a) Whether the collection of 

information is necessary for the proper 

performance of the OCC’s functions, 

including whether the information has 

practical utility; 

(b) The accuracy of the estimate of the 

burden of the information collection, 

including the validity of the 

methodology and assumptions used; 

(c) Ways to enhance the quality, 

utility, and clarity of the information to 

be collected; 

(d) Ways to minimize the burden of 

information collection on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology; and 

(e) Estimates of capital or startup costs 

and costs of operation, maintenance, 

and purchase of services to provide 

information. 

All comments will become a matter of 

public record. Comments should be 

addressed to: Communications Division, 

Office of the Comptroller of the 

Currency, Public Information Room, 

Mailstop 2–3, Attention: 1557–NEW, 

250 E Street, SW., Washington, DC 

20219. In addition, comments may be 

sent by fax to 202–874–5274, or by 

electronic mail to 

regs.comments@occ.treas.gov. You may 

personally inspect and photocopy 

comments at the OCC, 250 E Street, 

SW., Washington, DC 20219. For 

security reasons, the OCC requires that 

visitors make an appointment to inspect 

comments. You may do so by calling 

202–874–4700. Upon arrival, visitors 

will be required to present valid 

government-issued photo identification 

and submit to security screening in 

order to inspect and photocopy 

comments. 

Additionally, you should send a copy 

of your comments to the OMB Desk 

Officer, by mail to U.S. Office of 

Management and Budget, 725 17th 

Street, NW., 10235, Washington, DC 

20503, or by fax to 202–395–6974. 

Proposed Information Collection 

Title of Information Collection: Retail 

Foreign Exchange Transactions. 

Frequency of Response: On occasion. 

Affected Public: Businesses or other 

for-profit. 

Respondents: National banks and 

Federal branches and agencies of foreign 

banks. 

Reporting Requirements 

The reporting requirements in § 48.4 

would require that, prior to initiating a 

retail forex business, a national bank 

provide the OCC with prior notice and 

obtain a written supervisory nonobjection letter. In order to obtain a 

supervisory non-objection letter, a 

national bank must have written 

policies and procedures, and risk 

measurement and management systems 

in controls in place to ensure that retail 

forex transactions are conducted in a 

safe and sound manner. The national 

bank must also provide other 

information required by the OCC, such 

as documentation of customer due 

diligence, new product approvals, and 

haircuts applied to noncash margins. A 

national bank already engaging in a 

retail forex business may continue to do 

so, provided it requests an extension of 

time. 

Disclosure Requirements 

Under § 48.5, regarding the 

application and closing out of offsetting 

long and short positions, would require 

a national bank to promptly provide the 

customer with a statement reflecting the 

financial result of the transactions and 

the name of the introducing broker to 

the account. The customer would 

provide specific written instructions on 

how the offsetting transaction should be 

applied. 

Section 48.6 would require that a 

national bank furnish a retail forex 

customer with a written disclosure 

before opening an account that will 

engage in retail forex transactions for a 

retail forex customer and receive an 

acknowledgment from the customer that 

it was received and understood. It also 

requires the disclosure by a national 

bank of its fees and other charges and 

its profitable accounts ratio. 

Section 48.10 would require a 

national bank to issue monthly 

statements to each retail forex customer 

and to send confirmation statements 

following transactions. 

Section 48.13(b) would allow 

disclosure by a national bank that an 

order of another person is being held by 

them only when necessary to the 

effective execution of the order or when 

the disclosure is requested by the OCC. 

Section 48.13(c) would prohibit a 

national bank engaging in retail forex 

transactions from knowingly handling 

the account of any related person of 

another retail forex counterparty unless 

it receives proper written authorization, 

promptly prepares a written record of 

the order, and transmits to the 

counterparty copies all statements and 

written records. Section 48.13(d) would 

prohibit a related person of a national 

bank engaging in forex transactions from 

having an account with another retail 

forex counterparty unless it receives 

proper written authorization and copies 

of all statements and written records for 

such accounts are transmitted to the 

counterparty. 

Section 48.15 would require a 

national bank to provide a retail forex 

customer with 30 days’ prior notice of 

any assignment of any position or 

transfer of any account of the retail forex 

customer. It would also require a 

national bank to which retail forex 

accounts or positions are assigned or 

transferred to provide the affected 

customers with risk disclosure 


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37 2 U.S.C. 1532. 

38 In particular, the OCC notes that forex 

transactions between national banks and 

governmental entities are not retail forex 

transactions subject to this rule, because 

governmental entities are eligible contract 

participants. See 7 U.S.C. 1a(18)(A)(vii). 

statements and forms of 

acknowledgment and receive the signed 

acknowledgments within 60 days. 

The customer dispute resolution 

provisions in § 48.16 would require 

certain endorsements, 

acknowledgments, and signature 

language. It also would require that 

within 10 days after receipt of notice 

from the retail forex customer that they 

intend to submit a claim to arbitration, 

the national bank provide them with a 

list of persons qualified in the dispute 

resolution and that the customer must 

notify the national bank of the person 

selected within 45 days of receipt of 

such list. 

Policies and Procedures; Recordkeeping 

Sections 48.7 and 48.13 would require 

that a national bank engaging in retail 

forex transactions keep full, complete, 

and systematic records and establish 

and implement internal rules, 

procedures, and controls. Section 48.7 

also would require that a national bank 

keep account, financial ledger, 

transaction and daily records, as well as 

memorandum orders, post-execution 

allocation of bunched orders, records 

regarding its ratio of profitable accounts, 

possible violations of law, records for 

noncash margin, and monthly 

statements and confirmations. Section 

48.9 would require policies and 

procedures for haircuts for noncash 

margin collected under the rule’s 

margin requirements, and annual 

evaluations and modifications of the 

haircuts. 

Estimated PRA Burden 

Estimated Number of Respondents: 42 

national banks; 3 service providers. 

Total Reporting Burden: 672 hours. 

Total Disclosure Burden: 54,166 

hours. 

Total Recordkeeping Burden: 12,416 

hours. 

Total Annual Burden: 67,254 hours. 

C. Unfunded Mandates Reform Act of 

1995 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 37

(Unfunded Mandates Act), requires that 

an agency prepare a budgetary impact 

statement before promulgating any rule 

likely to result in a Federal mandate that 

may result in the expenditure by State, 

local, and tribal governments, in the 

aggregate, or by the private sector, of 

$100 million or more in any one year. 

If a budgetary impact statement is 

required, section 205 of the Unfunded 

Mandates Act also requires an agency to 

identify and consider a reasonable 

number of regulatory alternatives before 

promulgating a rule. The OCC has 

determined that this proposed rule, if 

adopted as a final rule, will not result 

in expenditures by State, local, and 

tribal governments, or by the private 

sector, of $100 million or more in any 

one year.38 Accordingly, this proposed 

rule is not subject to section 202 of the 

Unfunded Mandates Act. 

D. Plain Language 

Section 722 of the Gramm-LeachBliley Act requires the OCC to use plain 

language in all proposed and final rules 

published after January 1, 2000. The 

OCC invites comment on how to make 

this proposed rule easier to understand. 

For example, the OCC requests 

comment on such questions as: 

• Have we organized the material to 

suit your needs? If not, how could the 

material be better organized? 

• Have we clearly stated the 

requirements of the rule? If not, how 

could the rule be more clearly stated? 

• Does the rule contain technical 

language or jargon that is not clear? If 

so, which language requires 

clarification? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the regulation 

easier to understand? If so, what 

changes would make the regulation 

easier to understand? 

• What else could we do to make the 

regulation easier to understand? 

List of Subjects in 12 CFR Part 48 

Consumer protection, Definitions, 

Federal branches and agencies, Foreign 

currencies, Foreign exchange, National 

banks, Reporting and recordkeeping 

requirements. 

For the reasons stated in the 

preamble, the OCC proposes to add part 

48 to Title 12, Chapter I of the Code of 

Federal Regulations to read as follows: 

PART 48—RETAIL FOREIGN 

EXCHANGE TRANSACTIONS 

Sec. 

48.1 Authority, purpose, and scope. 

48.2 Definitions. 

48.3 Prohibited transactions. 

48.4 Supervisory non-objection. 

48.5 Application and closing out of 

offsetting long and short positions. 

48.6 Disclosure. 

48.7 Recordkeeping. 

48.8 Capital requirements. 

48.9 Margin requirements. 

48.10 Required reporting to customers. 

48.11 Unlawful representations. 

48.12 Authorization to trade. 

48.13 Trading and operational standards. 

48.14 Supervision. 

48.15 Notice of transfers. 

48.16 Customer dispute resolution. 

Authority: 12 U.S.C. 1, 24, 93a, 161, 

1813(q), 1818, 1831o, 3102, 3106a, 3108. 

§ 48.1 Authority, purpose and scope. 

(a) Authority. A national bank may 

engage in retail foreign exchange 

transactions. A national bank engaging 

in such transactions shall comply with 

the requirements of this part. 

(b) Purpose. This part establishes 

rules applicable to retail foreign 

exchange transactions engaged in by 

national banks and applies on or after 

the effective date. 

(c) Scope. This part applies to 

national banks. 

§ 48.2 Definitions. 

In addition to the definitions in this 

section, for purposes of this part, the 

following terms have the same meaning 

as in the Commodity Exchange Act: 

‘‘affiliated person of a futures 

commission merchant’’; ‘‘associated 

person’’; ‘‘contract of sale’’; 

‘‘commodity’’; ‘‘eligible contract 

participant’’; ‘‘futures commission 

merchant’’; ‘‘security’’; and ‘‘security 

futures product’’. 

Affiliate has the same meaning as in 

section 2(k) of the Bank Holding 

Company Act of 1956 (12 U.S.C. 

1841(k)). 

Commodity Exchange Act means the 

Commodity Exchange Act (7 U.S.C. 1 et 

seq.). 

Forex means foreign exchange. 

Institution-affiliated party or IAP has 

the same meaning as in 12 U.S.C. 

1813(u)(1), (2), or (3). 

Introducing broker means any person 

who solicits or accepts orders from a 

retail forex customer in connection with 

retail forex transactions. 

National bank means: 

(1) A national bank; 

(2) A Federal branch or agency of a 

foreign bank, each as defined in 12 

U.S.C. 3101; and 

(3) An operating subsidiary of a 

national bank or a Federal branch or 

agency of a foreign bank. 

Related person, when used in 

reference to a retail forex counterparty, 

means: 

(1) Any general partner, officer, 

director, or owner of ten percent or 

more of the capital stock of the national 

bank; 

(2) An associated person or employee 

of the retail forex counterparty, if the 

retail forex counterparty is not a 

national bank; 


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(3) An IAP, if the retail forex 

counterparty is a national bank; and 

(4) Any relative or spouse of any of 

the foregoing persons, or any relative of 

such spouse, who shares the same home 

as any of the foregoing persons. 

Retail foreign exchange dealer means 

any person other than a retail forex 

customer that is, or that offers to be, the 

counterparty to a retail forex 

transaction, except for a person 

described in item (aa), (bb), (cc)(AA), 

(dd), or (ff) of section 2(c)(2)(B)(i)(II) of 

the Commodity Exchange Act (7 U.S.C. 

2(c)(2)(B)(i)(II)). 

Retail forex account means the 

account of a retail forex customer, 

established with a national bank, in 

which retail forex transactions with the 

national bank as counterparty are 

undertaken, or the account of a retail 

forex customer that is established in 

order to enter into such transactions. 

Retail forex account agreement means 

the contractual agreement between a 

national bank and a retail forex 

customer that contains the terms 

governing the customer’s retail forex 

account with the national bank. 

Retail forex business means engaging 

in one or more retail forex transactions 

with the intent to derive income from 

those transactions, either directly or 

indirectly. 

Retail forex customer means a 

customer that is not an eligible contract 

participant, acting on his, her, or its 

own behalf and engaging in retail forex 

transactions. 

Retail forex proprietary account 

means: A retail forex account carried on 

the books of a national bank for one of 

the following persons; a retail forex 

account of which 10 percent or more is 

owned by one of the following persons; 

or a retail forex account of which an 

aggregate of 10 percent or more of which 

is owned by more than one of the 

following persons: 

(1) The national bank; 

(2) An officer, director or owner of ten 

percent or more of the capital stock of 

the national bank; or 

(3) An employee of the national bank, 

whose duties include: 

(i) The management of the national 

bank’s business; 

(ii) The handling of the national 

bank’s retail forex transactions; 

(iii) The keeping of records, including 

without limitation the software used to 

make or maintain those records, 

pertaining to the national bank’s retail 

forex transactions; or 

(iv) The signing or co-signing of 

checks or drafts on behalf of the 

national bank; 

(4) A spouse or minor dependent 

living in the same household as of any 

of the foregoing persons; or 

(5) An affiliate of the national bank; 

Retail forex counterparty includes, as 

appropriate: 

(1) A national bank; 

(2) A retail foreign exchange dealer; 

(3) A futures commission merchant; 

and 

(4) An affiliated person of a futures 

commission merchant. 

Retail forex transaction means an 

agreement, contract, or transaction in 

foreign currency that is offered or 

entered into by a national bank with a 

person that is not an eligible contract 

participant and that is: 

(1) A contract of sale of a commodity 

for future delivery or an option on such 

a contract; 

(2) An option, other than an option 

executed or traded on a national 

securities exchange registered pursuant 

to section 6(a) of the Securities 

Exchange Act of 1934 (15 U.S.C. 

78(f)(a)); or 

(3) Offered or entered into on a 

leveraged or margined basis, or financed 

by a national bank, its affiliate, or any 

person acting in concert with the 

national bank or its affiliate on a similar 

basis, other than: 

(i) A security that is not a security 

futures product as defined in section 

1a(47) of the Commodity Exchange Act 

(7 U.S.C. 1a(47)); or 

(ii) A contract of sale that— 

(A) Results in actual delivery within 

two days; or 

(B) Creates an enforceable obligation 

to deliver between a seller and buyer 

that have the ability to deliver and 

accept delivery, respectively, in 

connection with their line of business. 

§ 48.3 Prohibited transactions. 

(a) Fraudulent conduct prohibited. No 

national bank or its IAPs may, directly 

or indirectly, in or in connection with 

any retail forex transaction: 

(1) Cheat or defraud or attempt to 

cheat or defraud any person; 

(2) Willfully make or cause to be 

made to any person any false report or 

statement or cause to be entered for any 

person any false record; or 

(3) Willfully deceive or attempt to 

deceive any person by any means 

whatsoever. 

(b) Acting as counterparty and 

exercising discretion prohibited. If a 

national bank can cause retail forex 

transactions to be effected for a retail 

forex customer without the retail forex 

customer’s specific authorization, then 

neither the national bank nor its 

affiliates may act as the counterparty for 

any retail forex transaction with that 

retail forex customer. 

§ 48.4 Supervisory non-objection. 

(a) Supervisory non-objection 

required. Before commencing a retail 

forex business, a national bank shall 

provide the OCC with prior notice and 

obtain from the OCC a written 

supervisory non-objection. 

(b) Requirements for obtaining 

supervisory non-objection. (1) In order 

to obtain a written supervisory nonobjection, a national bank shall: 

(i) Establish to the satisfaction of the 

OCC that the national bank has 

established and implemented written 

policies, procedures, and risk 

measurement and management systems 

and controls for the purpose of ensuring 

that it conducts retail forex transactions 

in a safe and sound manner and in 

compliance with this part; and 

(ii) Provide such other information as 

the OCC may require. 

(2) The information provided under 

paragraph (b)(1) of this section shall 

include, without limitation, information 

regarding: 

(i) Customer due diligence, including 

without limitation credit evaluations, 

customer appropriateness, and ‘‘know 

your customer’’ documentation; 

(ii) New product approvals; 

(iii) The haircuts that the national 

bank will apply to noncash margin as 

provided in § 48.9(b)(2); and 

(iv) Conflicts of interest. 

(c) Treatment of existing retail forex 

businesses. A national bank that is 

engaged in a retail forex business on 

[EFFECTIVE DATE OF FINAL RULE] 

may continue to do so for up to six 

months, subject to an extension of time 

by the OCC, if it requests the 

supervisory non-objection required by 

paragraph (a) of this section within 30 

days of [EFFECTIVE DATE OF FINAL 

RULE] and submits the information 

required to be submitted under 

paragraph (b) of this section. 

(d) Compliance with the Commodity 

Exchange Act. A national bank that is 

engaged in a retail forex business on 

[EFFECTIVE DATE OF FINAL RULE] 

and complies with paragraph (c) of this 

section shall be deemed, during the sixmonth or extended period described in 

paragraph (c) of this section, to be acting 

pursuant to a rule or regulation 

described in section 2(c)(2)(E)(ii)(I) of 

the Commodity Exchange Act (7 U.S.C. 

2(c)(2)(E)(ii)(I)). 

§ 48.5 Application and closing out of 

offsetting long and short positions. 

(a) Application of purchases and 

sales. Any national bank that— 

(1) Engages in a retail forex 

transaction involving the purchase of 

any currency for the account of any 

retail forex customer when the account 


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of such retail forex customer at the time 

of such purchase has an open retail 

forex transaction for the sale of the same 

currency; 

(2) Engages in a retail forex 

transaction involving the sale of any 

currency for the account of any retail 

forex customer when the account of 

such retail forex customer at the time of 

such sale has an open retail forex 

transaction for the purchase of the same 

currency; 

(3) Purchases a put or call option 

involving foreign currency for the 

account of any retail forex customer 

when the account of such retail forex 

customer at the time of such purchase 

has a short put or call option position 

with the same underlying currency, 

strike price, and expiration date as that 

purchased; or 

(4) Sells a put or call option involving 

foreign currency for the account of any 

retail forex customer when the account 

of such retail forex customer at the time 

of such sale has a long put or call option 

position with the same underlying 

currency, strike price, and expiration 

date as that sold shall: 

(i) Immediately apply such purchase 

or sale against such previously held 

opposite transaction; and 

(ii) Promptly furnish such retail forex 

customer with a statement showing the 

financial result of the transactions 

involved and the name of any 

introducing broker to the account. 

(b) Close-out against oldest open 

position. In all instances where the short 

or long position in a customer’s retail 

forex account immediately prior to an 

offsetting purchase or sale is greater 

than the quantity purchased or sold, the 

national bank shall apply such offsetting 

purchase or sale to the oldest portion of 

the previously held short or long 

position. 

(c) Transactions to be applied as 

directed by customer. Notwithstanding 

paragraph (b) of this section, the 

offsetting transaction shall be applied as 

directed by a retail forex customer’s 

specific written instructions. These 

instructions may not be made by the 

national bank or an IAP. 

§ 48.6 Disclosure. 

(a) Risk disclosure statement required. 

No national bank may open or maintain 

open an account that will engage in 

retail forex transactions for a retail forex 

customer unless the national bank has 

furnished the retail forex customer with 

a separate written disclosure statement 

containing only the language set forth in 

paragraph (d) of this section and the 

disclosures required by paragraphs (e) 

and (f) of this section. 

(b) Acknowledgement of risk 

disclosure statement required. The 

national bank must receive from the 

retail forex customer a written 

acknowledgement signed and dated by 

the customer that the customer received 

and understood the written disclosure 

statement required by paragraph (a) of 

this section. 

(c) Placement of risk disclosure 

statement. The disclosure statement 

may be attached to other documents as 

the initial page(s) of such documents 

and as the only material on such 

page(s). 

(d) Content of risk disclosure 

statement. The language set forth in the 

written disclosure statement required by 

paragraph (a) of this section shall be as 

follows: 

Risk Disclosure Statement 

Retail forex transactions involve the 

leveraged trading of contracts denominated 

in foreign currency with a national bank as 

your counterparty. Because of the leverage 

and the other risks disclosed here, you can 

rapidly lose all of the funds you give the 

national bank as margin for such trading and 

you may lose more than you pledge as 

margin. 

Furthermore, you may lose funds in other 

accounts that you maintain at the national 

bank or its affiliates if you pledge those funds 

or other assets as collateral for your retail 

forex obligations. Your national bank is 

prohibited from applying losses that you 

experience on retail forex transactions on any 

funds or property of yours other than funds 

or property that you have given or pledged 

as margin for retail forex transactions. 

You should be aware of and carefully 

consider the following points before 

determining whether such trading is 

appropriate for you. 

(1) Trading is a not on a regulated market 

or exchange—your national bank is your 

trading counterparty and has conflicting 

interests. The retail forex transaction you are 

entering into is not conducted on an 

interbank market, nor is it conducted on a 

futures exchange subject to regulation as a 

designated contract market by the 

Commodity Futures Trading Commission. 

The foreign currency trades you transact are 

trades with your national bank as the 

counterparty. When you sell, the national 

bank is the buyer. When you buy, the 

national bank is the seller. As a result, when 

you lose money trading, your national bank 

is making money on such trades, in addition 

to any fees, commissions, or spreads the 

national bank may charge. 

(2) An electronic trading platform for retail 

foreign currency transactions is not an 

exchange. It is an electronic connection for 

accessing your national bank. The terms of 

availability of such a platform are governed 

only by your contract with your national 

bank. Any trading platform that you may use 

to enter into off-exchange foreign currency 

transactions is only connected to your 

national bank. You are accessing that trading 

platform only to transact with your national 

bank. You are not trading with any other 

entities or customers of the national bank by 

accessing such platform. The availability and 

operation of any such platform, including the 

consequences of the unavailability of the 

trading platform for any reason, is governed 

only by the terms of your account agreement 

with the national bank. 

(3) You may be able to offset or liquidate 

any trading positions only through your 

banking entity because the transactions are 

not made on an exchange or regulated 

contract market, and your national bank may 

set its own prices. Your ability to close your 

transactions or offset positions is limited to 

what your national bank will offer to you, as 

there is no other market for these 

transactions. Your national bank may offer 

any prices it wishes, including prices derived 

from outside sources or not in its discretion. 

Your national bank may establish its prices 

by offering spreads from third party prices, 

but it is under no obligation to do so or to 

continue to do so. Your national bank may 

offer different prices to different customers at 

any point in time on its own terms. The 

terms of your account agreement alone 

govern the obligations your national bank has 

to you to offer prices and offer offset or 

liquidating transactions in your account and 

make any payments to you. The prices 

offered by your national bank may or may not 

reflect prices available elsewhere at any 

exchange, interbank, or other market for 

foreign currency. 

(4) Paid solicitors may have undisclosed 

conflicts. The national bank may compensate 

introducing brokers for introducing your 

account in ways that are not disclosed to you. 

Such paid solicitors are not required to have, 

and may not have, any special expertise in 

trading, and may have conflicts of interest 

based on the method by which they are 

compensated. You should thoroughly 

investigate the manner in which all such 

solicitors are compensated and be very 

cautious in granting any person or entity 

authority to trade on your behalf. You should 

always consider obtaining dated written 

confirmation of any information you are 

relying on from your national bank in making 

any trading or account decisions. 

(5) This transaction is not insured by the 

Federal Deposit Insurance Corporation. 

(6) This transaction is not a deposit in, or 

guaranteed by, a national bank. 

(7) This transaction is subject to 

investment risks, including possible loss of 

all amounts invested. 

Finally, you should thoroughly investigate 

any statements by any national bank that 

minimize the importance of, or contradict, 

any of the terms of this risk disclosure. Such 

statements may indicate sales fraud. 

This brief statement cannot, of course, 

disclose all the risks and other aspects of 

trading off-exchange foreign currency with a 

national bank. 

I hereby acknowledge that I have received 

and understood this risk disclosure 

statement. 

lllllllllllllllllllll

Date 

lllllllllllllllllllll

Signature of Customer 


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(e)(1) Disclosure of profitable 

accounts ratio. Immediately following 

the language set forth in paragraph (d) 

of this section, the statement required 

by paragraph (a) of this section shall 

include, for each of the most recent four 

calendar quarters during which the 

national bank maintained retail forex 

customer accounts: 

(i) The total number of retail forex 

customer accounts maintained by the 

national bank over which the national 

bank does not exercise investment 

discretion; 

(ii) The percentage of such accounts 

that were profitable for retail forex 

customer accounts during the quarter; 

and 

(iii) The percentage of such accounts 

that were not profitable for retail forex 

customer accounts during the quarter. 

(2) The national bank’s statement of 

profitable trades shall include the 

following legend: ‘‘Past performance is 

not necessarily indicative of future 

results.’’ Each national bank shall 

provide, upon request, to any retail 

forex customer or prospective retail 

forex customer the total number of retail 

forex accounts maintained by the 

national bank for which the national 

bank does not exercise investment 

discretion, the percentage of such 

accounts that were profitable, and the 

percentage of such accounts that were 

not profitable for each calendar quarter 

during the most recent five-year period 

during which the national bank 

maintained such accounts. 

(f) Disclosure of fees and other 

charges. Immediately following the 

language required by paragraph (e) of 

this section, the statement required by 

paragraph (a) of this section shall 

include: 

(i) The amount of any fee, charge, or 

commission that the national bank may 

impose on the retail forex customer in 

connection with a retail forex account or 

retail forex transaction; 

(ii) An explanation of how the 

national bank will determine the 

amount of such fees, charges, or 

commissions; and 

(iii) The circumstances under which 

the national bank may impose such fees, 

charges, or commissions. 

(g) Future disclosure requirements. If, 

with regard to a retail forex customer, 

the national bank changes any fee, 

charge, or commission required to be 

disclosed under paragraph (f) of this 

section, then the national bank shall 

mail or deliver to the retail forex 

customer a notice of the changes at least 

15 days prior to the effective date of the 

change. 

(h) Form of disclosure requirements. 

The disclosures required by this section 

shall be clear and conspicuous and 

designed to call attention to the nature 

and significance of the information 

provided. 

(i) Other disclosure requirements 

unaffected. This section does not relieve 

a national bank from any other 

disclosure obligation it may have under 

applicable law. 

§ 48.7 Recordkeeping. 

(a) General rule. A national bank 

engaging in retail forex transactions 

shall keep full, complete and systematic 

records, together with all pertinent data 

and memoranda, of all transactions 

relating to its retail forex business, 

including: 

(1) Retail forex account records for 

each customer reflecting: 

(i) The name and address of the 

person for who such retail forex account 

is carried or introduced and the 

principal occupation or business of such 

person; 

(ii) The name of any other person 

guaranteeing such retail forex account 

or exercising trading control with 

respect to such account; 

(iii) The establishment or termination 

of each retail forex account; and 

(iv) For each retail forex account the 

records must also show the name of the 

person who has solicited and is 

responsible for the account or assign 

account numbers in such a manner as to 

identify that person. 

(2) Financial ledger records that show 

separately for each retail forex customer 

all charges against and credits to such 

retail forex customer’s account, 

including but not limited to retail forex 

customer funds deposited, withdrawn, 

or transferred, and charges or credits 

resulting from losses or gains on closed 

transactions. 

(3) Transaction records that show 

separately for each retail forex account 

and each retail forex proprietary 

account: 

(i) All retail forex transactions that are 

futures transactions executed for such 

account, including the date, price, 

quantity, market, currency pair, and 

delivery date; 

(ii) All retail forex transactions that 

are option transactions executed for 

such account, including the date, 

whether the transaction involved a put 

or call, expiration date, quantity, 

underlying contract for future delivery 

or underlying physical, strike price, and 

details of the purchase price of the 

option, including premium, mark-up, 

commission, and fees; and 

(iii) All other retail forex transactions 

that are executed for such account, 

including the date, price, quantity, and 

currency pair. 

(4) Daily records which show for each 

business day complete details of: 

(i) All retail forex transactions that are 

futures transactions executed on that 

day, including the date, price, quantity, 

market, currency pair, delivery date, 

and the person for whom such 

transaction was made; 

(ii) All retail forex transactions that 

are option transactions executed on that 

day, including the date, whether the 

transaction involved a put or call, the 

expiration date, quantity, currency pair, 

delivery date, strike price, details of the 

purchase price of the option, including 

premium, mark-up, commission and 

fees, and the person for whom the 

transaction was made; and 

(iii) All other retail forex transactions 

executed on that day for such account, 

including the date, price, quantity, 

currency and the person for whom such 

transaction was made. 

(5) Memorandum order (order ticket). 

Except as provided in paragraph (a)(6) 

of this section, immediately upon the 

written or verbal receipt of a retail forex 

transaction order, a national bank shall 

prepare a separate written memorandum 

order (order ticket) for the order 

(whether unfulfilled, executed or 

canceled), including: 

(i) Account identification (account or 

customer name with which the retail 

forex transaction was effected); 

(ii) Order number; 

(iii) Type of order (market order, limit 

order, or subject to special instructions); 

(iv) Date and time, to the nearest 

minute, the retail forex transaction order 

was received (as evidenced by 

timestamp or other timing device); 

(v) Time, to the nearest minute, the 

retail forex transaction order was 

executed; and 

(vi) Price at which the retail forex 

transaction was executed. 

(6) Post-execution allocation of 

bunched orders. Specific customer 

account identifiers for accounts 

included in bunched orders need not be 

recorded at time of order placement or 

upon report of execution as required 

under paragraph (a)(5) of this section if 

the following requirements are met: 

(i) The national bank placing and 

directing the allocation of an order 

eligible for post-execution allocation has 

been granted written investment 

discretion with regard to participating 

customer accounts and makes the 

following information available to 

customers upon request: 

(A) The general nature of the 

allocation methodology the national 

bank will use; 

(B) Whether the national bank has any 

interest in accounts which may be 

included with customer accounts in 


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bunched orders eligible for postexecution allocation; and 

(C) Summary or composite data 

sufficient for that customer to compare 

its results with those of other 

comparable customers and, if 

applicable, any account in which the 

national bank has an interest. 

(ii) A national bank must allocate 

orders eligible for post-execution 

allocation in accordance with the 

following: 

(A) Allocations must be made as soon 

as practicable after the entire transaction 

is executed; 

(B) Allocations must be fair and 

equitable; no account or group of 

accounts may receive consistently 

favorable or unfavorable treatment; and 

(C) The allocation methodology must 

be sufficiently objective and specific to 

permit independent verification of the 

fairness of the allocations using that 

methodology by the OCC. 

(7) Other records. Other records 

covered by this section include written 

acknowledgements of receipt of the risk 

disclosure statement required by 

§ 48.6(b), trading cards, signature cards, 

street books, journals, ledgers, payment 

records, copies of statements of 

purchase, and all other records, data 

and memoranda that have been 

prepared in the course of the national 

bank’s retail forex business. 

(b) Ratio of profitable accounts. (1) 

With respect to its active retail forex 

customer accounts over which it did not 

exercise investment discretion and that 

are not retail forex proprietary accounts 

open for any period of time during the 

quarter, a national bank shall prepare 

and maintain on a quarterly basis 

(calendar quarter): 

(i) A calculation of the percentage of 

such accounts that were profitable; 

(ii) A calculation of the percentage of 

such accounts that were not profitable; 

and 

(iii) Data supporting the calculations 

described in paragraphs (b)(1)(i) and (ii) 

of this section. 

(2) In calculating whether a retail 

forex account was profitable or not 

profitable during the quarter, the 

national bank shall compute the 

realized and unrealized gains or losses 

on all retail forex transactions carried in 

the retail forex account at any time 

during the quarter, and subtract all fees, 

commissions, and any other charges 

posted to the retail forex account during 

the quarter, and add any interest income 

and other income or rebates credited to 

the retail forex account during the 

quarter. All deposits and withdrawals of 

funds made by the retail forex customer 

during the quarter must be excluded 

from the computation of whether the 

retail forex account was profitable or not 

profitable during the quarter. 

Computations that result in a zero or 

negative number shall be considered a 

retail forex account that was not 

profitable. Computations that result in a 

positive number shall be considered a 

retail forex account that was profitable. 

(3) A retail forex account shall be 

considered ‘‘active’’ for purposes of 

paragraph (b)(1) of this section if and 

only if, for the relevant calendar quarter, 

a retail forex transaction was executed 

in that account or the retail forex 

account contained an open position 

resulting from a retail forex transaction. 

(c) Records related to possible 

violations of law. A national bank 

engaging in retail forex transactions 

shall make a record of all 

communications received by the 

national bank or its IAPs concerning 

facts giving rise to possible violations of 

law related to the national bank’s retail 

forex business. The record shall contain: 

The name of the complainant, if 

provided; the date of the 

communication; the relevant agreement, 

contract, or transaction; the substance of 

the communication; and the name of the 

person who received the 

communication. 

(d) Records for noncash margin. A 

national bank shall maintain a record of 

all noncash margin collected pursuant 

to § 48.9. The record shall show 

separately for each retail forex customer: 

(1) A description of the securities or 

property received; 

(2) The name and address of such 

retail forex customer; 

(3) The dates when the securities or 

property were received; 

(4) The identity of the depositories or 

other places where such securities or 

property are segregated or held, if 

applicable; 

(5) The dates in which the national 

bank placed or removed such securities 

or property into or from such 

depositories; and 

(6) The dates of return of such 

securities or property to such retail 

forex customer, or other disposition 

thereof, together with the facts and 

circumstances of such other disposition. 

(e) Record of monthly statements and 

confirmations. A national bank shall 

retain a copy of each monthly statement 

and confirmation required by § 48.10. 

(f) Manner of maintenance. The 

records required by this section must 

clearly and accurately reflect the 

information required and provide an 

adequate basis for the audit of the 

information. Record maintenance may 

include the use of automated or 

electronic records provided that the 

records are easily retrievable, readily 

available for inspection, and capable of 

being reproduced in hard copy. 

(g) Length of maintenance. A national 

bank shall keep each record required by 

this section for at least five years from 

the date the record is created. 

§ 48.8 Capital requirements. 

A national bank offering or entering 

into retail forex transactions must be 

well capitalized as defined by 12 CFR 

part 6, unless specifically exempted by 

the OCC in writing. 

§ 48.9 Margin requirements. 

(a) Margin required. A national bank 

engaging, or offering to engage, in retail 

forex transactions must collect from 

each retail forex customer an amount of 

margin not less than: 

(1) Two percent of the notional value 

of the retail forex transaction for major 

currency pairs and 5 percent of the 

notional value of the retail forex 

transaction for all other currency pairs; 

(2) For short options, 2 percent for 

major currency pairs and 5 percent for 

all other currency pairs of the notional 

value of the retail forex transaction, plus 

the premium received by the retail forex 

customer; or 

(3) For long options, the full premium 

charged and received by the national 

bank. 

(b)(1) Form of margin. Margin 

collected under paragraph (a) of this 

section or pledged by a retail forex 

customer in excess of the requirements 

of paragraph (a) of this section must be 

in the form of cash or the following 

financial instruments: 

(i) Obligations of the United States 

and obligations fully guaranteed as to 

principal and interest by the United 

States; 

(ii) General obligations of any State or 

of any political subdivision thereof; 

(iii) General obligations issued or 

guaranteed by any enterprise, as defined 

in 12 U.S.C. 4502(10); 

(iv) Certificates of deposit issued by 

an insured depository institution, as 

defined in section 3(c)(2) of the Federal 

Deposit Insurance Act (12 U.S.C. 

1813(c)(2)); 

(v) Commercial paper; 

(vi) Corporate notes or bonds; 

(vii) General obligations of a sovereign 

nation; 

(viii) Interests in money market 

mutual funds; and 

(ix) Such other financial instruments 

as the OCC deems appropriate. 

(2) Haircuts. A national bank shall 

establish written policies and 

procedures that include: 

(i) Haircuts for noncash margin 

collected under this section; and 


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(ii) Annual evaluation, and, if 

appropriate, modification of the 

haircuts. 

(c) Separate margin account. Margin 

collected by the national bank from a 

retail forex customer for retail forex 

transactions or pledged by a retail forex 

customer for retail forex transactions 

shall be placed into a separate account 

containing only such margin. 

(d) Margin calls; liquidation of 

position. For each retail forex customer, 

at least once per day, a national bank 

shall: 

(1) Mark the value of the retail forex 

customer’s open retail forex positions to 

market; 

(2) Mark the value of the margin 

collected under this section from the 

retail forex customer to market; 

(3) Determine if, based on the marks 

in paragraphs (c)(1) and (2) of this 

section, the national bank has collected 

margin from the retail forex customer 

sufficient to satisfy the requirements of 

this section; and 

(4) Collect such margin from the retail 

forex customer as the national bank may 

require to satisfy the requirements of 

this section, or liquidate the retail forex 

customer’s retail forex transactions. 

(e) Set-off prohibited. A national bank 

may not: 

(1) Apply a retail forex customer’s 

losses on retail forex transactions 

against any funds or other asset of the 

retail forex customer other than margin 

in the retail forex customer’s separate 

margin account described in paragraph 

(c) of this section; 

(2) Apply a retail forex customer’s 

losses on retail forex transactions to 

increase the amount owed by the retail 

forex customer to the national bank 

under any loan; or 

(3) Collect the margin required under 

this section by use of any right of setoff. 

§ 48.10 Required reporting to customers. 

(a) Monthly statements. Each national 

bank must promptly furnish to each 

retail forex customer, as of the close of 

the last business day of each month or 

as of any regular monthly date selected, 

except for accounts in which there are 

neither open positions at the end of the 

statement period nor any changes to the 

account balance since the prior 

statement period, but in any event not 

less frequently than once every three 

months, a statement that clearly shows: 

(1) For each retail forex customer: 

(i) The open retail forex transactions 

with prices at which acquired; 

(ii) The net unrealized profits or 

losses in all open retail forex 

transactions marked to the market; 

(iii) Any money, securities or other 

property in the separate margin account 

required by § 48.9(c); and 

(iv) A detailed accounting of all 

financial charges and credits to the 

retail forex customer’s retail forex 

accounts during the monthly reporting 

period, including: money, securities, or 

property received from or disbursed to 

such customer; realized profits and 

losses; and fees, charges, and 

commissions. 

(2) For each retail forex customer 

engaging in retail forex transactions that 

are options: 

(i) All such options purchased, sold, 

exercised, or expired during the 

monthly reporting period, identified by 

underlying retail forex transaction or 

underlying currency, strike price, 

transaction date, and expiration date; 

(ii) The open option positions carried 

for such customer and arising as of the 

end of the monthly reporting period, 

identified by underlying retail forex 

transaction or underlying currency, 

strike price, transaction date, and 

expiration date; 

(iii) All such option positions marked 

to the market and the amount each 

position is in the money, if any; 

(iv) Any money, securities or other 

property in the separate margin account 

required by § 48.9(c); and 

(v) A detailed accounting of all 

financial charges and credits to the 

retail forex customer’s retail forex 

accounts during the monthly reporting 

period, including: money, securities, or 

property received from or disbursed to 

such customer; realized profits and 

losses; and fees, charges, and 

commissions. 

(b) Confirmation statement. Each 

national bank must, not later than the 

next business day after any retail forex 

transaction, send: 

(1) To each retail forex customer, a 

written confirmation of each retail forex 

transaction caused to be executed by it 

for the customer, including offsetting 

transactions executed during the same 

business day and the rollover of an open 

retail forex transaction to the next 

business day; 

(2) To each retail forex customer 

engaging in forex option transactions, a 

written confirmation of each forex 

option transaction, containing at least 

the following information: 

(i) The retail forex customer’s account 

identification number; 

(ii) A separate listing of the actual 

amount of the premium, as well as each 

mark-up thereon, if applicable, and all 

other commissions, costs, fees and other 

charges incurred in connection with the 

forex option transaction; 

(iii) The strike price; 

(iv) The underlying retail forex 

transaction or underlying currency; 

(v) The final exercise date of the forex 

option purchased or sold; and 

(vi) The date the forex option 

transaction was executed. 

(3) To each retail forex customer 

engaging in forex option transactions, 

upon the expiration or exercise of any 

option, a written confirmation statement 

thereof, which statement shall include 

the date of such occurrence, a 

description of the option involved, and, 

in the case of exercise, the details of the 

retail forex or physical currency 

position which resulted therefrom 

including, if applicable, the final trading 

date of the retail forex transaction 

underlying the option. 

(c) Notwithstanding the provisions of 

paragraphs (b)(1) through (3) of this 

section, a retail forex transaction that is 

caused to be executed for a pooled 

investment vehicle that engages in retail 

forex transactions need be confirmed 

only to the operator of such pooled 

investment vehicle. 

(d) Controlled accounts. With respect 

to any account controlled by any person 

other than the retail forex customer for 

whom such account is carried, each 

national bank shall promptly furnish in 

writing to such other person the 

information required by paragraphs (a) 

and (b) of this section. 

(e) Introduced accounts. Each 

statement provided pursuant to the 

provisions of this section must, if 

applicable, show that the account for 

which the national bank was introduced 

by an introducing broker and the name 

of the introducing broker. 

§ 48.11 Unlawful representations. 

(a) No implication or representation of 

limiting losses. No national bank 

engaged in retail foreign exchange 

transactions or its IAPs may imply or 

represent that it will, with respect to 

any retail customer forex account, for or 

on behalf of any person: 

(1) Guarantee such person or account 

against loss; 

(2) Limit the loss of such person or 

account; or 

(3) Not call for or attempt to collect 

margin as established for retail forex 

customers. 

(b) No implication of representation of 

engaging in prohibited acts. No national 

bank or its IAPs may in any way imply 

or represent that it will engage in any of 

the acts or practices described in 

paragraph (a) of this section. 

(c) No Federal government 

endorsement. No national bank or its 

IAPs may represent or imply in any 

manner whatsoever that any retail forex 

transaction or retail forex product has 


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been sponsored, recommended, or 

approved by the OCC, the Federal 

government, or any agency thereof. 

(d) Assuming or sharing of liability 

from bank error. This section shall not 

be construed to prevent a national bank 

from assuming or sharing in the losses 

resulting from the national bank’s error 

or mishandling of a retail forex 

transaction. 

(e) Certain guaranties unaffected. This 

section shall not affect any guarantee 

entered into prior to the effective date 

of this part, but this section shall apply 

to any extension, modification or 

renewal thereof entered into after such 

date. 

§ 48.12 Authorization to trade. 

(a) Specific authorization required. No 

national bank may directly or indirectly 

effect a retail forex transaction for the 

account of any retail forex customer 

unless, before the transaction occurs, 

the retail forex customer specifically 

authorized the national bank, in writing, 

to effect the retail forex transaction. 

(b) Requirements for specific 

authorization A retail forex transaction 

is ‘‘specifically authorized’’ for purposes 

of this section if the retail forex 

customer specifies: 

(1) The precise retail forex transaction 

to be effected; 

(2) The exact amount of the foreign 

currency to be purchased or sold; and 

(3) In the case of an option, the 

identity of the foreign currency or 

contract that underlies the option. 

§ 48.13 Trading and operational standards. 

(a) Internal rules, procedures, and 

controls required. A national bank 

engaging in retail forex transactions 

shall establish and implement internal 

rules, procedures, and controls 

designed, at a minimum, to: 

(1) Ensure, to the extent reasonable, 

that each order received from a retail 

forex customer that is executable at or 

near the price that the national bank has 

quoted to the customer is entered for 

execution before any order in any retail 

forex transaction for any proprietary 

account, any other account in which a 

related person has an interest, or any 

account for which such a related person 

may originate orders without the prior 

specific consent of the account owner (if 

such related person has gained 

knowledge of the retail forex customer’s 

order prior to the transmission of an 

order for a proprietary account), an 

account in which such a related person 

has an interest, or an account in which 

such a related person may originate 

orders without the prior specific 

consent of the account owner; 

(2) Prevent national bank related 

persons from placing orders, directly or 

indirectly, with another person in a 

manner designed to circumvent the 

provisions of paragraph (a)(1) of this 

section; 

(3) Fairly and objectively establish 

settlement prices for retail forex 

transactions; and 

(4) Record and maintain essential 

information regarding customer orders 

and account activity, and to provide 

such information to customers upon 

request. Such information shall include: 

(i) Transaction records for the 

customer’s account, including: 

(A) The date and time each order is 

received by the national bank; 

(B) The price at which each order is 

placed, or, in the case of an option, the 

premium paid; 

(C) If the transaction was entered into 

by means of a trading platform, the price 

quoted on the trading platform when the 

order was placed, or, in the case of an 

option, the premium quoted; 

(D) The customer account 

identification information; 

(E) The currency pair; 

(F) The size of the transaction; 

(G) Whether the order was a buy or 

sell order; 

(H) The type of order, if the order was 

not a market order; 

(I) If a trading platform is used, the 

date and time the order is transmitted to 

the trading platform; 

(J) If a trading platform is used, the 

date and time the order is executed; 

(K) The size and price at which the 

order is executed, or in the case of an 

option, the amount of the premium paid 

for each option purchased, or the 

amount credited for each option sold; 

and 

(L) For options, whether the option is 

a put or call, the strike price, and 

expiration date. 

(ii) Account records that contain the 

following information: 

(A) The funds in the account, net of 

any commissions and fees; 

(B) The net profits and losses on open 

trades; and 

(C) The funds in the account plus or 

minus the net profits and losses on open 

trades. (In the case of open option 

positions, the account balance should be 

adjusted for the net option value); 

(iii) If a trading platform is used, daily 

logs showing each price change on the 

platform, the time of the change to the 

nearest second, and the trading volume 

at that time and price; and 

(iv) Any method or algorithm used to 

determine the bid or asked price for any 

retail forex transaction or the prices at 

which customer orders are executed, 

including, but not limited to, any 

markups, fees, commissions or other 

items which affect the profitability or 

risk of loss of a retail forex customer’s 

transaction. 

(b) Disclosure of retail forex 

transactions. No national bank engaging 

in retail forex transactions may disclose 

that an order of another person is being 

held by the national bank, unless the 

disclosure is necessary to the effective 

execution of such order or the 

disclosure is made at the request of the 

OCC. 

(c) Handling of retail forex accounts 

of related persons of retail forex 

counterparties. No national bank 

engaging in retail forex transactions 

shall knowingly handle the retail forex 

account of any related person of another 

retail forex counterparty unless it: 

(1) Receives written authorization 

from a person designated by such other 

retail forex counterparty with 

responsibility for the surveillance over 

such account pursuant to paragraph 

(a)(2) of this section; 

(2) Prepares immediately upon receipt 

of an order for such account a written 

record of such order, including the 

account identification and order 

number, and records thereon to the 

nearest minute, by time-stamp or other 

timing device, the date and time the 

order is received; and 

(3) Transmits on a regular basis to 

such other retail forex counterparty 

copies of all statements for such account 

and of all written records prepared upon 

the receipt of orders for such account 

pursuant to paragraph (a)(2) of this 

section. 

(d) Related person of national bank 

establishing account at another retail 

forex counterparty. No related person of 

a national bank engaging in retail forex 

transactions may have an account, 

directly or indirectly, with another retail 

forex counterparty unless: 

(1) It receives written authorization to 

maintain such an account from a person 

designated by the national bank of 

which it is a related person with 

responsibility for the surveillance over 

such account pursuant to paragraph 

(a)(2) of this section; and 

(2) Copies of all statements for such 

account and of all written records 

prepared by such other retail forex 

counterparty upon receipt of orders for 

such account pursuant to paragraph 

(c)(2) of this section are transmitted on 

a regular basis to the retail forex 

counterparty of which it is a related 

person. 

(e) Prohibited trading practices. No 

national bank engaging in retail forex 

transactions may: 

(1) Enter into a retail forex 

transaction, to be executed pursuant to 


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Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / Proposed Rules 22647 

a market or limit order at a price that is 

not at or near the price at which other 

retail forex customers, during that same 

time period, have executed retail forex 

transactions with the national bank; 

(2) Adjust or alter prices for a retail 

forex transaction after the transaction 

has been confirmed to the retail forex 

customer; 

(3) Provide a retail forex customer a 

new bid price for a retail forex 

transaction that is higher than its 

previous bid without providing a new 

asked price that is also higher than its 

previous asked price by a similar 

amount; 

(4) Provide a retail forex customer a 

new bid price for a retail forex 

transaction that is lower than its 

previous bid without providing a new 

asked price that is also lower than its 

previous asked price by a similar 

amount; or 

(5) Establish a new position for a 

retail forex customer (except one that 

offsets an existing position for that retail 

forex customer) where the national bank 

holds outstanding orders of other retail 

forex customers for the same currency 

pair at a comparable price. 

§ 48.14 Supervision. 

(a) Supervision by the national bank. 

A national bank engaging in retail forex 

transactions shall diligently supervise 

the handling by its officers, employees, 

and agents (or persons occupying a 

similar status or performing a similar 

function) of all retail forex accounts 

carried, operated, or advised by at the 

national bank and all activities of its 

officers, employees, and agents (or 

persons occupying a similar status or 

performing a similar function) relating 

to its retail forex business. 

(b) Supervision by officers, employees, 

or agents. An officer, employee, or agent 

of a national bank must diligently 

supervise his or her subordinates’ 

handling of all retail forex accounts at 

the national bank and all the 

subordinates’ activities relating to the 

national bank’s retail forex business. 

§ 48.15 Notice of transfers. 

(a) Prior notice generally required. 

Except as provided in paragraph (b) of 

this section, a national bank must 

provide a retail forex customer with 30 

days’ prior notice of any assignment of 

any position or transfer of any account 

of the retail forex customer. The notice 

must include a statement that the retail 

forex customer is not required to accept 

the proposed assignment or transfer and 

may direct the national bank to 

liquidate the positions of the retail forex 

customer or transfer the account to a 

retail forex counterparty of the retail 

forex customer’s selection. 

(b) Exceptions. The requirements of 

paragraph (a) of this section shall not 

apply to transfers: 

(1) Requested by the retail forex 

customer; 

(2) Made by the Federal Deposit 

Insurance Corporation as receiver or 

conservator under the Federal Deposit 

Insurance Act; or 

(3) Otherwise authorized by 

applicable law. 

(c) Obligations of transferee national 

bank. A national bank to which retail 

forex accounts or positions are assigned 

or transferred under paragraph (a) of 

this section must provide to the affected 

retail forex customers the risk disclosure 

statements and forms of 

acknowledgment required by this part 

and receive the required signed 

acknowledgments within sixty days of 

such assignments or transfers. This 

requirement shall not apply if the 

national bank has clear written evidence 

that the retail forex customer has 

received and acknowledged receipt of 

the required disclosure statements. 

§ 48.16 Customer dispute resolution. 

(a) Voluntary submission of claims to 

dispute or settlement procedures. No 

national bank shall enter into any 

agreement or understanding with a 

retail forex customer in which the 

customer agrees, prior to the time a 

claim or grievance arises, to submit such 

claim or grievance to any settlement 

procedure unless the following 

conditions are satisfied: 

(1) Signing the agreement must not be 

made a condition for the customer to 

use the services offered by the national 

bank. 

(2) If the agreement is contained as a 

clause or clauses of a broader 

agreement, the customer must 

separately endorse the clause or clauses. 

(3) The agreement must advise the 

retail forex customer that, at such time 

as the customer notifies the national 

bank that the customer intends to 

submit a claim to arbitration, or at such 

time the national bank notifies the 

customer of its intent to submit a claim 

to arbitration, the customer will have 

the opportunity to choose a person 

qualified in dispute resolution to 

conduct the proceeding. 

(4) The agreement must acknowledge 

that the national bank will pay any 

incremental fees that may be assessed in 

connection with the dispute resolution, 

unless it is determined in the 

proceeding that the retail forex customer 

has acted in bad faith in initiating the 

proceeding. 

(5) The agreement must include the 

following language printed in large 

boldface type: 

The opportunity to settle disputes by 

arbitration may in some cases provide 

benefits to customers, including the ability to 

obtain an expeditious and final resolution of 

disputes without incurring substantial cost. 

Each customer must individually examine 

the relative merits of arbitration and consent 

to this arbitration agreement must be 

voluntary. 

By signing this agreement, you: (1) May be 

waving your right to sue in a court of law; 

and (2) are agreeing to be bound by 

arbitration of any claims or counterclaims 

which you or [insert name of national bank] 

may submit to arbitration under this 

agreement. In the event a dispute arises, you 

will be notified if [insert name of national 

bank] intends to submit the dispute to 

arbitration. 

You need not sign this agreement to open 

or maintain a retail forex account with [insert 

name of national bank]. 

(b) Election of forum. (1) Within ten 

business days after receipt of notice 

from the retail forex customer that the 

customer intends to submit a claim to 

arbitration, the national bank must 

provide the customer with a list of 

persons qualified in dispute resolution. 

(2) The customer shall, within 45 days 

after receipt of such list, notify the 

national bank of the person selected. 

The customer’s failure to provide such 

notice shall give the national bank the 

right to select a person from the list. 

(c) Enforceability. A dispute 

settlement procedure may require 

parties using such procedure to agree, 

under applicable state law, submission 

agreement or otherwise, to be bound by 

an award rendered in the procedure, 

provided that the agreement to submit 

the claim or grievance to the voluntary 

procedure under paragraph (a) of this 

section or that agreement to submit the 

claim or grievance was made after the 

claim or grievance arose. Any award so 

rendered shall be enforceable in 

accordance with applicable law. 

(d) Time limits for submission of 

claims. The dispute settlement 

procedure used by the parties shall not 

include any unreasonably short 

limitation period foreclosing submission 

of a customer’s claims or grievances or 

counterclaims. 

(e) Counterclaims. A procedure for the 

settlement of a retail forex customer’s 

claims or grievances against a national 

bank or employee thereof may permit 

the submission of a counterclaim in the 

procedure by a person against whom a 

claim or grievance is brought. Such a 

counterclaim may be permitted where it 

arises out of the transaction or 

occurrence that is the subject of the 

customer’s claim or grievance and does 


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22648 Federal Register / Vol. 76, No. 78 / Friday, April 22, 2011 / Proposed Rules 

1See generally 12 U.S.C. 5365(d). 

2The ability to undertake advance planning for 

the resolution of any financial institution, from 

small banks to globally active financial companies, 

is a precondition for effective crisis management 

and resolution. 

not require for adjudication the 

presence of essential witnesses, parties, 

or third persons over which the 

settlement process lacks jurisdiction. 

Dated: April 18, 2011. 

John Walsh, 

Acting Comptroller of the Currency. 

[FR Doc. 2011–9821 Filed 4–21–11; 8:45 am] 

BILLING CODE 4810–33–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 252 

[Regulation YY; Docket No. R–1414] 

RIN 7100–AD73 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 381 

RIN 3064–AD77 

Resolution Plans and Credit Exposure 

Reports Required 

AGENCIES: Board of Governors of the 

Federal Reserve System (Board) and 

Federal Deposit Insurance Corporation 

(Corporation). 

ACTION: Proposed rule; request for 

public comment. 

SUMMARY: The Board and the 

Corporation request comment on this 

proposed rule that implements the 

requirements in section 165(d) of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the ‘‘DoddFrank Act’’) regarding resolution plans 

and credit exposure reports. Section 

165(d) requires each nonbank financial 

company supervised by the Board and 

each bank holding company with assets 

of $50 billion or more to report 

periodically to the Board, the 

Corporation, and the Financial Stability 

Oversight Council (the ‘‘Council’’) the 

plan of such company for rapid and 

orderly resolution in the event of 

material financial distress or failure, and 

the nature and extent of credit 

exposures of such company to 

significant bank holding companies and 

significant nonbank financial companies 

and the nature and extent of the credit 

exposures of significant bank holding 

companies and significant nonbank 

financial companies to such company. 

Section 165(d)(8) of the Dodd-Frank Act 

requires the Board and the Corporation 

to jointly issue final rules implementing 

section 165(d) by not later than January 

21, 2012. 

DATES: Comments should be received on 

or before June 10, 2011. 

ADDRESSES: Comments should be 

directed to: 

Board: You may submit comments, 

identified by Docket No. 1414 and RIN 

no. 7100–AD73, by any of the following 

methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include docket number in the subject 

line of the message. 

• Fax: (202) 452–3819 or (202) 452– 

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available from 

the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Street, NW.) between 9 a.m. and 5 p.m. 

on weekdays. 

Corporation: You may submit 

comments by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web site: http:// 

www.FDIC.gov/regulations/laws/ 

federal/propose.html 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments/Legal 

ESS, Federal Deposit Insurance 

Corporation, 550 17th Street, NW., 

Washington, DC 20429. 

• Hand Delivered/Courier: The guard 

station at the rear of the 550 17th Street 

Building (located on F Street), on 

business days between 7 a.m. and 5 p.m. 

• E-mail: comments@FDIC.gov. 

Instructions: Comments submitted 

must include ‘‘FDIC’’ and ‘‘RIN 3064– 

AD77.’’ Comments received will be 

posted without change to http:// 

www.FDIC.gov/regulations/laws/ 

federal/propose.html, including any 

personal information provided. 

FOR FURTHER INFORMATION CONTACT: 

Board: Barbara J. Bouchard, Senior 

Associate Director, (202) 452–3072, or 

Avery I. Belka, Counsel, (202) 736–5691, 

Division of Banking Regulation and 

Supervision; or Ann E. Misback, 

Associate General Counsel, (202) 452– 

3788, or Dominic A. Labitzky, Senior 

Attorney, (202) 452–3428, Legal 

Division; Board of Governors of the 

Federal Reserve System, 20th and C 

Streets, NW., Washington, DC 20551. 

Users of Telecommunication Device for 

Deaf (TDD) only, call (202) 263–4869. 

Corporation: Joseph Fellerman, Senior 

Program Analyst, (202) 898–6591, Office 

of Complex Financial Institutions, 

Richard T. Aboussie, Associate General 

Counsel, (703) 562–2452, David N. Wall, 

Assistant General Counsel, (703) 562– 

2440, Mark A. Thompson, Counsel, 

(703) 562–2529, or Mark G. Flanigan, 

Counsel, (202) 898–7426, Legal 

Division. 

SUPPLEMENTARY INFORMATION: 

I. Background 

To promote financial stability, section 

165(d) of the Dodd-Frank Act requires 

each nonbank financial company 

supervised by the Board and each bank 

holding company with total 

consolidated assets of $50 billion or 

more to periodically submit to the 

Board, the Corporation and the Council 

a plan for such company’s rapid and 

orderly resolution in the event of 

material financial distress or failure, and 

a report on the nature and extent of 

credit exposures of such company to 

significant bank holding companies and 

significant nonbank financial companies 

and the nature and extent of credit 

exposures of significant bank holding 

companies and significant nonbank 

financial companies to such company.1

This proposed rule would implement 

the resolution plan and credit exposure 

reporting requirements set forth in 

section 165(d) of the Dodd-Frank Act. 

Section 165(d) provides regulators 

with the ability to conduct advance 

resolution planning for a covered 

company. As demonstrated by the 

Corporation’s experience in failed bank 

resolutions, as well as the Board’s and 

the Corporation’s experience in the 

recent crisis, advance planning is 

critical for an efficient resolution of a 

company subject to the proposed rule.2

Advance planning has long been a 

component of resiliency and recovery 

planning by financial companies. The 

Dodd-Frank Act requires that certain 

financial companies incorporate 

resolution planning into their overall 


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